Just as the human skeleton provides a structure allowing us to walk our chosen paths, an organization's structure enables a company to move forward on its mission. All the parts within a company's framework must coordinate activities to carry out management's strategic plans. Choosing the right structure partly determines a company's success. Among the several frameworks a company can adopt is the traditional functional structure. A vertical, pyramidal hierarchy characterizes this structure, which departmentalizes job activities according to function. Marketing, production, finance, human resources, and research and development are segregated from one another. The structure has several advantages.
The Industrial Revolution gave rise to today's traditional organization structure. Before the revolution, people worked at small businesses catering to local markets. People's job roles often overlapped and a strict management structure wasn't necessary. As mass production increased, so did the division of labor. Specialization improved efficiency and productivity, as did grouping specialized jobs into departments by function. Management hierarchies above specialized workers and departments took care of broader concerns, controlling and synthesizing the efforts of subordinates. This evolution from a loose to a tightly controlled structure led to the vertical, pyramidal framework that is the functional organizational structure.
The functional organizational structure creates an environment for communication. Because employees are related in terms of function, job context is understood within departments, providing a basis for understanding. Employees in the same department also understand each other's jargon. The nature of the functional structure, with its clear-cut chain of command, also clearly establishes who reports to whom.
Enhanced communication means enhanced coordination as workers within the same department easily come to a meeting of the minds. The hierarchal functional structure also leaves no doubt when it comes to accountability and management privileges, so directives are clear and unified.
The traditional functional organizational structure relies on divisions of labor, which turns employees into expert specialists. Such experts can create innovations. Having experts on hand also makes training easier, and problems may get solved more quickly because the company has access to experts.
Economies of Scale and Efficiency
The term "economies of scale" refers to the increasing efficiency, productivity and savings that occur as scope increases. By creating specialists, the traditional structure makes it possible for each person to be more productive and efficient in respective tasks, which can result in higher output. Grouping tasks by function also means resources can be used more efficiently. Equipment and personnel are clustered rather than being duplicated in more than one area.
- Management: Meeting and Exceeding Customer Expectations; Warren R. Plunkett et al.
- Reference for Business: Organizational Structure
- Berlin School of Economics: Organizational Structure and Control
- University of North Florida: Fundamentals of Organization Structure
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